Business Meal A Tidbit In Tax Report But Indigestion To Thousands

September 25, 1986|By Howard Means of the Sentinel Staff

WASHINGTON — The first thing to be said about the ''conference report'' on the Tax Reform Act of 1986 is that it is a formidable document. At 1,811 pages in two volumes -- $37 from the Government Printing Office -- it is more than formidable: It is gargantuan.

The second thing is that it has been, in the manner of documents that so heavily affect the $200-shoes crowd, a best seller. The GPO put the report on sale Monday morning at 8; by 2 that afternoon, 13,000 copies had sold. That's one every 16.6 seconds. Eat your heart out, Louis L'Amour.

The third thing to be said is that the 4.1 pounds of the conference report, which chronicles the House and Senate versions of the bill and the conference agreement, don't begin to tell the true story of tax act, nor the true stories contained therein.

Take pages 24 through 27 of Vol. II -- deductions for meal expenses. The National Restaurant Association would say, Take them please, but it is not without bias in the matter.

Under present law, ''food and beverage expenses that constitute ordinary and necessary business expenses generally are deductible if the meal takes place in an atmosphere conducive to business discussion, whether or not business is discussed before, during, or after the meal.''

In short, you don't have to ruin the prime ribs by talking contracts, but you probably shouldn't eat the prime ribs in a strip joint. (You shouldn't eat them there at any rate, strip-joint kitchens being what they are.)

The House tax bill limited the deduction to 80 percent of the tab and tightened the definition of ''business connected.'' The Senate sensibly contributed an amendment preserving for two years the full deductibility of banquet meals if, among other items, the meal includes a speaker -- ''sensibly'' because senators are far more apt than congressmen to be invited as speakers.

In essence, what the package means is that the

3-martini business lunch will become the 2.4-martini lunch: The business picks up the tab for the vermouth; taxpayers continue to pay for the gin.

That's straightforward enough, but what doesn't get told is that write- offs for business meals have been at issue since at least 1961, when John Kennedy declared, ''The slogan -- 'It's deductible' -- should pass from the scene.''

The 1962 tax reforms that followed managed to insert the mushy phrase ''lavish and extravagant'' in the list of business-meal taboos. Actually trimming the deduction, and then only by 20 percent, has consumed another quarter of a century.

What doesn't get told is the feverish efforts by the National Restaurant Association to prevent even that modest trim. Some 20,000 association members protested in writing to the Senate Finance Committee, only the tip of the lobbying effort.

''We did what we could to tell the people on Capitol Hill what the impact would be,'' said Dorothy Dee, head of media relations for the association. ''They certainly heard. Why they didn't listen, you'd have to ask them.''

What doesn't get told is a study by Chase Econometrics estimating that the measure would cost the restaurant industry $8.9 billion in 1987 alone and 342,000 lost jobs.

Those figures may be inflated or plumb crazy: The study was done for the restaurant association, and the businessmen I've seen eating this week don't look like they're on their last free meal. But they do illustrate a fundamental fact: Tax policy is central to the conduct of American life. Every small decision -- three pages in this case out of 1,811 pages -- extends vastly beyond itself.

Remember: There are 8 million stories in the naked conference report. This is only one of them.